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UK House Prices Hit All Time High

June 9, 2014

Figures released by Nationwide have shown that average UK house prices have rocketed over the past year to a record high of £186,512, above the 2008 pre-crisis peak, the Telegraph reports.

The annual rate of house price growth has risen to 11.1 per cent in May, with prices having recorded their thirteenth successive monthly increase, catalysed by first time buyers increasingly desperate to climb the first rung on the property ladder.

Nationwide have said that they expect the high demand for homes to remain the same, if not rise even further, and Chief UK and European Economist at IHS Global Insight, Howard Archer expects a 5-6 per cent increase in prices over the remaining months of 2014, raising speculation that the Bank of England will be forced to take measures to cool the market.

However, Archer also states that there has been “tentative signs that activity in the housing market may be starting to moderate”, with the Bank of England reporting on Monday that mortgage approvals in April were 17 pc below January’s high and levels were the lowest since last summer.

Robert Gardner, chief economist at Nationwide, said on Tuesday, that “it is too early to say whether nationally this is indicative of a cooling trend in the wider market.”

“The slowdown may partly be the result of the introduction of Mortgage Market Review (MMR) measures, which may take a few months to bed down. The underlying pace of activity should become more evident as we move through the summer months and the impact of MMR becomes clearer,” he explained.

In an unprecedented attack on UK Government policy on Tuesday, the European Commission requested that the Chancellor, George Osborne rein in his flagship Help to Buy scheme and raise council tax across the UK in order to prevent house prices from becoming out of control, particularly in London.

Despite the unexpected criticism from Brussels, Nationwide believe that the Government’s shared equity and mortgage guarantee scheme – Help to Buy – is currently only playing a “supporting role not a starring role” in the recovery of the housing market. The total number of mortgages secured using the programme was only 9 per cent of the total market, according to recently released figures.

Of all housing purchases in May, 48 per cent were accounted for by first time buyers, up from 38 per cent in the previous month, helping to drive the housing market recovery across the UK.

Young families and the younger middle-aged are taking advantage of mortgage rates that are close to an all time low and improving labour market conditions. An increase in ‘parental loans’ has also been critical in helping their children and grandchildren get on the property ladder in anticipation of probable interest rate increases.

Rupert Snowden of Innovo Property says that he expects the rise in prices to have leveled out by the beginning of 2014.

“What we are seeing is a very localised property bubble which is causing a rise in average house price over the entire country. Whilst property in the North, the Midlands and the South-West have recorded marginal increases, it is the price surge in London which is affecting the country as a whole,” he said.

“I fully expect that once measures have been put into place to stabilise house prices in London, we will begin to see prices returning to more affordable rates and we should experience a rise in the number of people willing to offload their properties.

“If I have to give a timescale,” he adds, “I would expect measures to be put into place before the end of the summer, and I would predict that we will see the results before the end of Q1 2015”

Bradley Shore is an experienced property and investment writer, he enjoys helping building the knowledge of his readers through his articles and keeping people informed on the latest from property to investment to travel. Check out his twitter page.